Matsushita wary of Panasonic plasma success

BusinessWeek: The company behind Panasonic is raking in profits, yet is concerned about falling flat-panel TV prices and LCD makers’ latest offensive.

Panasonic's 103-inch plasma TVLast Friday, the world’s largest consumer-electronics maker said flat-panel TVs and digital cameras were responsible for one of its best quarters in more than a decade, putting it on track for a fifth straight year of big gains. It was vindication of Matsushita’s strategy of betting big on the plasma TV business.

Matsushita, which has one-third of the plasma TV market, has been kicking the stuffing out of rivals and raking in profits despite sharply falling prices of TVs and other consumer electronics worldwide. The company said third-quarter operating profit rose 5% to $1.12 billion on a 2% uptick in sales to $20 billion.

The division that makes TVs, digital cameras and SD memory cards posted operating margins above 6%—a first—thanks to brisk sales and a weak yen, which boosts the value of overseas earnings. The strong performance prompted the company to revise upward its full-year net profit and sales forecasts.

Still, Matsushita, best known for its Panasonic brand, isn’t resting easy.

Only a week ago, LG – the world’s No. 2 plasma TV maker—reported that its digital display division had racked up a stunning $158 million operating loss in the fourth quarter and that it wouldn’t expand beyond its current capacity of 550,000 panels a month.

You would think Matsushita would be giddy at the prospect of being able to pick up additional market share from struggling rivals. But Executive Vice-President Tetsuya Kawakami doesn’t see things that way. “Having just one plasma maker in the world—Matsushita—wouldn’t be a good thing,” he said.

Kawakami frets that if LG and Samsung bow out of the race, consumers might get the impression that plasma is inferior to liquid-crystal displays, the other main flat-panel TV technology.

Sales of flat panels have been surging at double-digit rates as consumers swap their clunky old picture-tube sets for sleek new ones.

This year, LCD sales could jump 56% to 69.7 million units, vs. a 33% gain to 12.8 million for plasma, according to market research firm DisplaySearch. The giant screens will be where the pitched battles occur in coming years.

Matsushita is already heavily invested in what it hopes will be a booming big-screen TV market. In January, President Fumio Ohtsubo unveiled plans to set aside $2.35 billion for a fifth plasma panel plant in Japan, even before the fourth facility, located on a nearby plot, has been finished. The new plant will make larger sheets of glass than any of the older plants, which means more panels for TVs can be cut from each sheet. By next year, Matsushita’s plants are expected to be churning out a half-million sets a month—more than 11 a minute.

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